Businesses move on green tech sans Washington

LAGUNA NIGUEL, Calif.--In the absence of leadership from the federal government, businesses are the best vehicle for slowly transitioning society away from fossil fuels.

That's one of the themes from the Fortune Brainstorm Green this week, a conference to explore environmental sustainability at corporations.

Innovation is the only way to address the "technology gap" that exists between the price of fossil fuels and clean-energy technologies, such as solar, wind, and electric vehicles, said Michael Shellenberger, the president of the Breakthrough Institute.

"This huge gulf that still exists between fossil fuels and clean tech has got to be overcome to do anything about climate," Shellenberger said. "We can make low-carbon, less polluting technologies a lot cheaper through innovation." Policies geared at raising fossil fuel prices are unlikely to work, but he suggested a combination of policies, such as military procurement and government programs toaccelerate technology development, could bring down the cost of alternatives.

There was clear consensus among attendees that the federal government is not going to pass a comprehensive energy law in the near future to mandate more renewable energy or have big polluters pay for carbon emissions. The previous Congress failed to pass a climate and energy law and this Congress is attempting to scale back the Environmental Protection Agency's powers on air pollutants.

If there won't be bold action on global warming, the thinking goes, people can still agree that the government can play a role advancing clean-energy technologies.

"There's a recognition that we need to put more money into technology," said Jim Rogers, the CEO of utility Duke Energy. "The best hope for the next couple of years at least is that investing in more technology will allow us to provide carbon-free electricity in a more affordable way."

Greening of business
Corporations are vital to getting green technologies into the market either by being customers or when they develop products of their own. Nicholas Parker, the chairman of researcher the Cleantech Group, noted in a session that corporations are becoming active investors in green-tech start-ups.

Many technologies, such as more efficiency lighting and fuel-saving hybrids, are attractive because they improve productivity or save businesses money. Wal-Mart's high-profile sustainability program, for example, hassaved the company money and generated revenue through selling products, such as compact fluorescent bulbs.

A sustainability initiative a few years ago at Ford led to the company's development of electric and hybrid vehicles. No doubt concerned with possible greenhouse gas regulations, the company developed a "fuel diversification" strategy that aligned with government policy and consumers' interest in fuel efficiency, said Nancy Gioia, the director of global electrification. But rather than make it a "sustainability effort" on the side, Ford incorporated efficiency into its overall company strategy.

"We weren't doing science experiments. We embedded electrification into product plans in the near, mid, and long term," she said. "We wanted it to be sustainable in every sense of the word."

Some corporate sustainability efforts are clearly geared at improving corporate image. But in the case of water, managing corporate image isn't just coming out with a "green" product or marketing campaign; it's about community or investor relations.

Both Coca-Cola and Molson have initiatives to better understand their water impact where they locate plants because they don't want a backlash and conflict over water usage. Molson next week is having a forum with internal water experts and its community affairs people to come up with strategies for sharing information with communities about water in specific water sheds, said Bart Alexander, the chief responsibility officer.

Meanwhile, corporations without a water sustainability strategy could be in for a "rude awakening" from advocacy groups who pressure corporate boards, said Jason Morrison, the technical director of the UN CEO Water Mandate and program director of the Pacific Institute.

Scaling up
Another theme winding through the conference was about which country will come to dominate green-technology industries. In a poll, more than 80 percent of attendees predicted that China will dominate clean tech in 10 years. Last week, a Pew Charitable Trusts study of clean-energy investments said the U.S. has fallen to No. 3 behind China and Germany.

U.S. companies may end up inventing green technologies that are manufactured and brought to scale in other countries, said Mark Fulton, the global head of research at DB Climate Change Advisors at Deutsche Asset Management. "It just may be the big deployment strategies will be in Europe and China. Whether America misses the big manufacturing play in the next five years--that's the question," he said.

On a panel on China, experts argued that China is well poised to develop alternative energy technologies at scale. Whereas U.S. policies are inconsistent, China's government formulates multi-year plans. It also has a pressing need for more energy of all forms, both fossil fuel and alternatives, as well as serious and evident environmental problems on air and water quality.

China's development of new industries, such as electric vehicles, renewable energy, and grid storage, will reduce the country's overall pollution and provide a testing ground for these technologies at scale, said Li Lu, chairman of Himalaya Capital Management.

"To have a country implement on a large scale what will eventually work is crucially important to civilization everywhere. We all have a stake in how this (multi-decade) transformation (away from fossil fuels) will occur," he said.

Scott Jacobs, an associate principal from consulting company McKinsey, said it's encouraging that many countries, including China, Korea, Japan, France, Germany, and the U.K., are trying to build a low-carbon economy and scale up green energy. Technology is developing faster than politicians and financiers realize, he said.

"We will see the technology make a case for itself. Is there capital absent the policy to get to a scale where it's credible? The answer is yes but the scale up may not be in the United States," he said.